I made a 3 part series on how to buy a home, how to get a rental property, and the benefits of having rental property. In that series, my friend Dudley posed a good question as to how to manage rental properties. Here’s how Sheena and I handle ours.
The key factor is protecting your investment and automating as much as you can. Keep this in the back of your mind. I’ll be referencing that throughout this post.
When managing a property, you have to consider what all does it entail.
I’m a huge advocate for Google products. They’re free, really useful, syncs on all of your devices, and works really well together. I’ll be referencing various Google products throughout this post. Namely Gmail, Google Calendar and Google Drive. I also use Chase Bank, so I’ll make references to their services as well, such as Online BillPay and Chase QuickPay. I’m sure other large banks can offer the same thing, so you would have to inquire with your bank about it.
What we use:
- a separate bank account for each rental property
- They’re free to open
- Makes it easier to see the income/expenses on each house
- Allows for each tenant to have an account to directly deposit their monthly rent
- Google Drive
- Google Drive is a central location where you can store spreadsheets, word documents and PDF files.
- All documents on Google Drive are sync’d on all of your devices (computer, phone, tablets, etc..) giving you access no matter where you are.
- Google Drive allows you to save up PDF’s so I keep a copy of each rental contract for quick reference when I need it.
- Google Sheets (Google’s version of an Excel Spreadsheet)
- I use a spreadsheet to keep track of all expenses and income for each house (separate spreadsheet for each house).
- I keep a spreadsheet that lists all my repair people I use with a brief description containing their name, what service they provide, contact info and my notes of their work.
- Google Docs (Google’s version of a Word Document)
- I maintain word document templates I use to communicate with tenants (letters about HOA violations, late rent, rent increase, etc…).
Now lets get into the details of each item I deal with as a Landlord.
Find tenants – This is huge. You want a good tenant that’ll pay you on time and will take care of your house. We use a Realtor to find and filter through potential tenants. It is a lot of work to do a thorough review of each potential tenant and show the property. Since Sheena and I both work full time, we’re OK with paying for a Realtor to do that work for us. Finding the best tenant possible (able to make the monthly rent on time, willing and able to take care of the home properly, etc…) will mean less headache in the future so it’s wise to invest time/money/effort in finding the right one.
Collect your rent – We have our tenants directly deposit their money into a designated account. As noted above, we open a regular checking account for each rental house. I nickname them the street name of the house for the sake of clarity when I look online. Currently, both tenants like to use Chase’s QuickPay service. Because of the way Chase sets things up, the money is directed into one account. This forces me to take the extra step of transferring the money from one account to the next, but that’s no biggie. I log in around the 6th of every month to confirm that the rent has been paid. In that process, I just make the transfer online and it’s done.
Here’s what I like about Chase QuickPay. As soon as the tenant sends me their rent, I get an email from Chase. Once I get that email, I use the app on my phone (if I’m away from a computer) to accept the payment and it’s in the account. This helps me know that rent for that month has been paid (with the email notification). I also have a reminder via Google Calendar to check if payment has been made. I set up Google Calendar to email/text me on the 6th of every month to verify that payment has been made. If payment hasn’t been made, I know to touch base with the tenant notifying them that late fees are being applied until I get paid in full.
Manage your Rental income/expenses – We use Google Sheets to keep track of all income and expenses related to each rental property. This is great because it can be updated anywhere I have internet access, allowing me to be up-to-date on all financial tracking. For example, if I’m installing a new microwave at a property, I can immediately update the expenses from my phone without giving myself an opportunity to forget or lose receipts (I still keep all my receipts, FYI). Keeping a spreadsheet for each property is also helpful around tax time. I can generate a report showing all income/expenses for the year and use that for my tax filings.
I utilize simple “sumIF” formulas to make it very easy to keep track of things in real time. With those formulas, all I have to do is input the basic information (as seen below) and my yearly totals self-populate. Its nice to know where we stand financially on each house as time progresses. Just as a note, the numbers below are made up for the sake of an example.
Pay for the mortgage – Sheena and I get paper bills sent to us from our mortgage company. I know it’s archaic, but it helps remind me that the bills are due when I get something in the mail. Rent for each house is due on the 1st (and no later than the 6th of each month) and our mortgage payment is due on the 1st (no later than the 15th of each month). My bank (Chase Bank) allows me to schedule a transfer between accounts, so I schedule money from each of the rental house accounts (the exact amount of the mortgage payment) to go into my “Master” Account. See my previous blog about how to save to get a better idea of how we organize our personal finances. Through my Master Account, I pay for the mortgages via the Bank’s online bill pay system.
Since the exact amount of the mortgage (which is inclusive of taxes and insurance) is extracted from each property’s bank account, what is left in the account are the profits. We let the profits accumulate over time and then take a large sum of it on an annual basis to pay down the principal of the loan. Being that each house has it’s own account, it makes things very easy to visually see how much each house is generating (in addition to the tracking spreadsheet).
Establish an emergency fund – Stuff happens. You may have to do some repairs on the house, or you might have to float the note for a month or two while you’re in between tenants. It’s always a good idea to have some money saved up to fund those type of events. If you’re looking for ideas on how to save, click here. You can either pull that money from your own personal savings to “pad” the account with an emergency fund, or you can use the profits from your rental property to slowly build the emergency fund. No matter which route you take, I would highly recommend having some money on the side for emergency situations. The amount is really up to you, but I’d factor in how much your mortgage payment is and maybe pad yourself for a couple of months. The idea of an emergency fund is to avoid going into any major debt when an event occurs. Big ticket items like replacing a roof or Air Conditioning unit or even foundation repair (all of which I had to get done) can get very pricey… It’s better to have some money in preparation for that instead of digging a large hole of debt when it’s time to pay the piper. It’s not a matter of “if” it’ll happen, it’s a matter of “when” it’ll happen, so be prepared.
Dealing with Repairs – No matter how great your tenants are, repairs will happen. We have a list of “vendors” we use for various projects. General Handy Men, Plumbers, Electricians, HVAC guys, landscapers.. the list goes on and on. I personally like doing the work myself if at all possible, but sometimes the jobs are over my head, so it’s best to call the pros to get it done right. Also, in emergencies when I’m not available to even check it out, it’s best to have multiple contacts with repair guys in case one’s busy, you have another to call to get the job done.
This is also a Google Sheets document so that I have access to it anywhere. I have these same numbers stored in my phone for easy access, but I like having a spreadsheet as well because it allows me to keep notes on these guys to track which ones I like to work with the best.
Deal with normal maintenance on the house – This runs side by side with dealing with repairs. As with any house, you’ll have to deal with the regular maintenance of the home. This falls under the “protect your investment” category. Simply changing the A/C filter on a regular basis allows your A/C Unit to work a little easier and helps the entire unit last longer. Keeping your foundation watered during hot/dry seasons help avoid damage to your foundation which in-turn avoids costly foundation repair. These types of simple maintenance items are easy to do, but also easy to forget as well. Set up reminders for yourself. Create a schedule of when you’d like those things taken care of and remind your tenants when to do them. Google Calendar allows you to schedule events on a regular basis (weekly, monthly, every 3 months, etc..). You can even set it up to remind you (via email or text) that the event has come.
If you’re considering getting into the Rental Business or are already in it, I hope you found this to be helpful! If you have tips to share, please post ’em in the comments section! I’d love to hear it and I’m sure others would find it helpful as well! If you’ve got questions, I’d be happy to address them!